9. INCOME TAXES
The Company’s tax expense differs from the “expected” tax expense for the years ended December 31, 2016 and 2015, (computed by applying the Federal Corporate tax rate of 34% to loss before taxes and 5.5% for Florida State Corporate Taxes, the blended rate used was 37.63%), are approximately as follows:
|
| December 31, | ||
|
| 2016 |
| 2015 |
Computed “expected” tax expense (benefit) - Federal | $ | (1,084,483) | $ | (1,777,507) |
Computed “expected” tax expense (benefit) - State |
| (185,641) |
| (304,273) |
Permanent differences |
| 620,615 |
| 1,874,050 |
Change in valuation allowance |
| 649,509 |
| 207,730 |
| $ | - | $ | - |
|
| 2016 |
| 2015 |
Current portion of net deferred income tax assets: |
|
|
|
|
Accrued salary | $ | 249,976 | $ | 207,730 |
Inventory Reserve |
| 69,254 |
| - |
Valuation allowance |
| (319,230) |
| (207,730) |
Current net deferred income tax asset | $ | - | $ | - |
|
|
|
|
|
Non- current portion of net deferred income tax asset |
|
|
|
|
Net operating loss carryforwards | $ | 12,667,206 | $ | 12,143,139 |
Valuation allowance |
| (12,667,206) |
| (12,143,139) |
Non-current net deferred income tax asset | $ | - | $ | - |
Due to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred tax assets, we have provided a valuation allowance to fully reserve such assets.
As of December 31, 2016, the Company has net operating loss carryforwards of approximately $33,663,000 available to offset future taxable income in various years through December 31, 2035. The significant difference between such net operating loss carryforwards and our accumulated deficit of approximately $19,696,000 results primarily from stock based compensation and debt settlements which are considered to be permanent differences.
The valuation allowances increased by approximately $649,000 and $207,000 for the years ended December 31, 2016 and 2015, respectively. The Company’s 2012 to 2015 tax returns are subject to examination by Internal Revenue Services and State Taxing Agency’s.